Ground rent clause meant unable to remortgage

capy_bara_queen

Hi, 

I’d really appreciate some advice! I have just had no remortgage my leasehold flat, however was only able to continue with my existing lender as other lenders wouldn’t lend to me (including big name high street banks & building societies) because of the ground rent clause.

The ground rent clause is as follows:
- ground rent is currently £150 per annum until and including 1 July 2029 and is then determined by the rent review
- ground rent is subject to review on 1 January 2031 and every 10th anniversary of that date
- it will then be increased by the following formula:

A = B + 25%

Where A = the reviewed ground rent
B = ground rent immediately payable prior to the commencement of the review period 

So in Jan 2031 it will increase by 25% to £187.50
In Jan 2041 to £234.38 etc etc

What the lender said was that the government are putting pressure on lenders to be more stringent on ground rent clauses that are not increasing in line with inflation (has anyone else heard that?).

I contacted my management company who have point blank said that because this isn’t government legislation that they have no plans to change the current ground rent terms.

I was looking to sell my apartment at some point this year however this is now really concerning me, as the clause will either massively devalue the property &/or mean that buyers are unable to get a mortgage!

Has anyone else had the same/ similar experience? Any advice? Any help? I’m really panicking!

For ref. Lease has 121 years left, value approx £190k

Thank you

saajan_12

Increasing by 25% every 10 years is equivalent increasing by inflation if inflation was 2.26%. So if the average inflation turns out to be any higher, then you're actually better off with this clause. There is a chance that this lease gives an above inflationary rent, but thats only if the average inflation is < 2.26% which isn't going to be common. Given the BoE aim for a ~2% inflation, this is quite a fair lease. 

What did the other lenders say? Could some have been antsy at the mention of 10-yearly increases? As leases doubling ground rent every 10 years has been an issue. 

Olinda99

25% every 10 years does not sound unreasonable

are you sure they don't mistakenly think.it is doubling every 10 years ?

Sam_666

Other option is to start formal process for pepercorn rent.
Cost vary, but around £5k.